The arrest of a top Adidas sports marketing executive this week as part of an FBI corruption sting is unlikely to have a major impact on the German athletic apparel company’s booming business, according to a retail industry analyst.
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James Gatto, the global marketing head of Adidas’ basketball division, was arrested on Tuesday amid allegations that he conspired to illicitly funnel cash to the families of top college basketball recruits to influence them to sign with Adidas-sponsored schools.
Gatto’s arrest comes at a time of major growth for Adidas in the United States. The company’s North American sales rose 26% in its most recent fiscal quarter, even as competitors like Nike and Under Armour have experienced slowing sales growth in the region. Adidas’ footwear sales recently surpassed those of Nike’s Jordan imprint to become the second-largest U.S. brand, according to NPD Group.
“Based on what we know now, I’d say the story is embarrassing but not impactful,” NPD Group sports industry analyst Matt Powell told FOX Business, later adding on Twitter that Adidas’ college endorsement deals were “not important” to the company’s recent resurgence in North America.
College endorsements not important to Adidas resurgence. Unless there is more, this is a non event— Matt Powell (@NPDMattPowell) September 26, 2017
Adidas shares fell more than 2.5% in Tuesday trading after the arrests were announced. Gatto was one of 10 individuals arrested in connection with the FBI’s corruption probe, including four NCAA assistant basketball coaches.
Gatto purportedly used fake invoices to disguise the payments – some of which amounted to six figures – on the company’s books. He is accused of funneling some of the payments to a top recruit who later attended the University of Louisville, a school that Adidas sponsors.
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Authorities did not mention Adidas by name and instead referred to a unnamed major global sportswear brand in court documents. However, Adidas acknowledged that one of its employees was among those arrested.
"Today, we became aware that federal investigators arrested an Adidas employee. We are learning more about the situation. We’re unaware of any misconduct and will fully cooperate with authorities to understand more," Adidas said in a statement.
U.S. Attorney Joon Kim said authorities do not suspect any other Adidas executives of wrongdoing.